Mitsubishi (TSE:8058) Is Due To Pay A Dividend Of ¥50.00

Mitsubishi Corporation (TSE:8058) has announced that it will pay a dividend of ¥50.00 per share on the 24th of June. This will take the dividend yield to an attractive 3.6%, providing a nice boost to shareholder returns.

View our latest analysis for Mitsubishi

Mitsubishi's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Mitsubishi was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 4.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 43%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥20.00 in 2015, and the most recent fiscal year payment was ¥100.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Mitsubishi has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Mitsubishi has seen EPS rising for the last five years, at 20% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Mitsubishi's prospects of growing its dividend payments in the future.

Mitsubishi Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Mitsubishi (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.